The TSX Composite Index continued to climb 0.59% on Friday, growing 1.6% since Tuesday. TSX kept climbing even after U.S. president Donald Trump took to social media, writing in all caps, “ALL TRADE NEGOTIATIONS WITH CANADA ARE HEREBY TERMINATED.” His reaction comes as Ontario premier Doug Ford ran an advertisement on major U.S. channels featuring former president Ronald Reagan speaking negatively about tariffs.
Why isn’t the TSX reacting to Trump’s threats?
There are three reasons for the TSX not to react.
Firstly, the advertisement comes days before the upcoming Supreme Court case about the legality of Trump’s “reciprocal” tariffs. Trump accused Canada of interfering with the case, rattling already icy relations between Ottawa and Washington. If the Supreme Court rules reciprocal tariffs illegal, Canada stands to gain.
Secondly, the U.S. government has entered its fourth week of shutdown, making it the second-longest shutdown after December 2018. For Trump to make any decision, the government needs to restart because implementing tariffs has an administrative cost. There are no signs of the shutdown ending anytime soon.
Lastly, this is not the first time Trump has terminated trade talks with Canada. In June 2025, he terminated talks over the treatment of American tech companies and dairy farmers. Canada rescinded its digital services tax to negotiate with the United States. If matters worsen, Prime Minister Mark Carney will find a solution to keep the trade talks going.
Why is TSX climbing?
While the U.S. is dealing with a government shutdown and tariffs on China, the TSX had news to rejoice in. WTI crude price surged as the U.S. imposed sanctions on Russia’s two biggest oil companies — Rosneft and Lukoil — on Thursday. The energy and finance-heavy TSX jumped as energy stocks rallied.
One thing delaying the true upside potential of energy stocks is the talks to resolve a two-year-long dispute over shipping costs for Canada’s Trans Mountain pipeline. The pipeline connects east to west and gives Canada direct access to China and other Asian markets. This pipeline is critical for Canada as it looks to diversify its trade partners.
Should you be worried about Trump tariffs?
The upcoming trade talks, which have been temporarily halted, were for the Canada-United States-Mexico Agreement (CUSMA). The automotive and auto parts maker Magna International and Bombardier are protected by CUSMA.
All other sectors will continue to do business as usual.
Paul Beaudry, former deputy governor at the Bank of Canada, stated that Trump is using tariffs to raise money while cutting taxes for Americans and looking to generate jobs.
A 10% universal tariff would raise US$2 trillion, and a 20% would raise US$3.3 trillion from 2025 through 2034, according to the Tax Foundation. He doesn’t want to let go of this revenue. Hence, any trade negotiations might only be on extreme tariffs, like the 100% tariff on China. Beaudry believes that Canada should prepare for a permanent 5-10% tariff. The TSX has already absorbed this level of tariff.
Where to invest in the current TSX market?
Once the new normal is set and uncertainty fades, companies can plan their investments. You could consider investing in stocks that are not dependent on exports, such as Loblaw.
A contrarian strategy is to invest in a stock that will benefit from a new trade normal. Descartes Systems (TSX:DSG) will be a beneficiary of a trade certainty being achieved at some point. Whether it is a structural shift in the global supply chain or complying with new customs duties, Descartes Systems can help companies adapt efficiently. A recovery in trading volumes could drive its revenue and profits.
